$924m top bid for CBD site beats forecasts

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http://www.straitstimes.com/archive/friday/premium/money/story/924m-top-bid-cbd-site-beats-forecasts-20130816

$924m top bid for CBD site beats forecasts

FC Commercial Trustee submits highest offer for Telok Ayer site

Published on Aug 16, 2013

By Cheryl Ong


A BATTLE between four developers for a prime city centre commercial site yielded a top bid that easily trumped market forecasts.

FC Commercial Trustee, a unit of Frasers Centrepoint, offered $924 million, or $1,112 per sq ft (psf) per plot ratio (ppr) for the 99-year leasehold plot between Cecil and Telok Ayer streets.

This was 19 per cent above Far East Organization's bid of $777.8 million - or $936 psf ppr.

The other bids for the 7,603sqm plot came from Mapletree Investments and a joint tender from two private individuals.

Market experts were way off the mark. They had tipped a top bid of up to $960 psf ppr when the site was put up for sale in June.

The top bid was above the $1,005 psf ppr paid by Guocoland for a nearby plot, where it is building the Tanjong Pagar Centre, but Frasers Centrepoint says its offer is still below its break-even cost of $2,000 psf ppr.

"When we bid, we don't know what the other bids will be. What is important is your break-even price and if you're comfortable with it," said group chief executive Lim Ee Seng yesterday.

"This is a prime site, and when we complete the building in three to four years, I don't think you can get a ready-made, high-end office building for that kind of money. It's a long-term investment."

Industry experts noted that demand for the plot could have been driven by expectations of a possible upswing in rents.

"The top bid of $1,112 psf ppr reflects expectations of a stronger recovery in the office property market, which is currently stable with moderate demand," said Jones Lang LaSalle Singapore research director Ong Teck Hui.

The site is one of the last remaining commercial plots in the financial district, experts added.

"Due to the limited supply of quality commercial sites or buildings within the Central Business District, it is not surprising that companies with commercial leasing as their core business will actively seek out new projects," said CBRE Research associate director Desmond Sim.

The site can accommodate a 50-storey office block and could have a direct connection to Tanjong Pagar MRT station.

But any development on it cannot be sub-divided into strata office units for sale, according to Urban Redevelopment Authority restrictions.

"We might hold on to it and rent it out, or even inject it into our real estate investment trust in the future," said Mr Lim.

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http://www.businesstimes.com.sg/archive/friday/premium/singapore/cbd-site-fetches-top-bid-111244-psf-ppr-20130816

Published August 16, 2013

CBD site fetches top bid of $1,112.44 psf ppr

Frasers Centrepoint offer is 18.8% above next highest bid

By Kalpana Rashiwala [email protected]


FRASERS Centrepoint's top bid yesterday for a 99-year leasehold commercial site at Cecil Street/Telok Ayer Street was 18.8 per cent higher than the next highest offer, by Far East Organization.

However, Frasers Centrepoint group chief executive Lim Ee Seng said that he was comfortable with the group's bid price of $1,112.44 per square foot per plot ratio (psf ppr), which would result in a breakeven cost of about $2,000 psf for a new development.

At least 80 per cent of the 830,564 sq ft maximum gross floor area in the development must be set aside for office use.

Strata subdivision of the project is not allowed.

Residential use is also not permitted for the project, which will be directly connected to Tanjong Pagar MRT Station, based on rules for the site stipulated by the Urban Redevelopment Authority.

The tender for the site drew four bids.

"When completed in four years, (it will be) a brand new office building in the CBD with a $2,000 psf breakeven cost - I think it's a very decent price," said Mr Lim.

Agreeing, a seasoned property consultant said: "I don't think you can find a brand new office building in the CBD at $2,000 psf in today's market. It's a fair bid price."

He noted that Tuan Sing paid $2,580 psf on existing net lettable area for the freehold Robinson Point in June.

The 14th and 18th floors of Springleaf Tower in Anson Road have changed hands at $2,200 psf and $2,280 psf respectively. Springleaf Tower has a remaining leasehold tenure of about 82 years.

CBRE Research associate director Desmond Sim said: "There still remains a gap between any seller's and buyer's price expectations and hence boosting one's portfolio through development would seem a viable option. It also allows the top bidder to build the development according to market preferences as well as to the top bidder's strengths."

Ong Teck Hui, national director at Jones Lang LaSalle, said the 19 per cent gap between the top two bids yesterday "reflects a divergence in office market outlook".

The top bid of $1,112 psf ppr points to expectations of a stronger recovery in the office market, which is currently "stable with moderate demand".

"However, the rest of the bids are seen as more cautious, probably factoring in a slower recovery in the market due to uncertainty over the strength of economic growth as well as oncoming supply over the next few years," added Mr Ong.

Frasers Centrepoint said yesterday: "This is one of the last remaining commercial sites within the mature part of the CBD. We plan to build a high-rise premium Grade A office building incorporating the latest office features.

"The proposed building will enjoy an excellent frontage amidst the lush greenery of an open park within the site."

Mr Lim said Frasers Centrepoint has no specific plans for the project other than to complete it and explore the possibility of injecting it into its Frasers Commercial Trust, or holding it for the long term.

Market watchers say they would not be surprised if Frasers Centrepoint decides to move its headquarters, currently at Alexandra Point, to the proposed development in Cecil Street. Thus it could occupy part of the proposed development while leasing out the rest of the space.

Mr Lim said the group is likely to incorporate space for some food and beverage outlets as part of the maximum 20 per cent non-office component in the project.

The other two bidders at yesterday's tender were Mapletree ($901 psf ppr) and Philippine property group Megaworld Corporation's AT Capital Holdings, which offered $851 psf ppr.

Makati-headquartered Megaworld's portfolio of projects includes business parks, offices, malls and hotels.

The 81,840 sq ft site was triggered from the reserve list after an unnamed developer successfully applied for its release, with a minimum price commitment translating to $750.97 psf ppr.

At a September 2011 state tender, Far East Organization group clinched a site next to Capital Tower for $882 psf ppr, which it is now developing into SBF Centre, comprising strata offices and medical suites which it is selling.

In late 2010, GuocoLand paid $1,006 psf ppr for a "white" site above Tanjong Pagar MRT Station - with minimum office and hotel components stipulated at 60 per cent and 10 per cent respectively of the maximum GFA.